Affordability complaints are not a new thing when it comes to small loans. Most Lenders say that they carefully assess your application to decide if they should lend you money, and they should. Many people file complaints against them to get them trapped in an expensive deal, leading to affordability complaints.

It might come as a shock to you when you file an affordability complaint that lenders simply say that you are on the hook as you fell down on giving accurate information about your income and Expenses. Yes, you can say that they are beating the rap or just putting you off to take the matter to Financial Ombudsman Service.

But sometimes, this entire thing boils down to the “5-minute loan application”.

Not knowing all of your expenses is not unusual

The loan application form varies by lender. A few lenders are out there that ask for the entire details, like regular expenses, discretionary expenses, fixed payments, dependent family members, and so forth.

These kinds of forms are more reliable for taking stock of your financial situation of yours. Yet, it is likely that you end up borrowing more than your affordability because many borrowers, according to debt advisors, do not know their expenses.

It is not surprising for people not to remember:

• Variable expenses like Christmas, gifts, school uniforms, trips, etc.
• How many expenses do their partners share?
• How much do they spend on food and other items?

Not asked about most expenses

On the other hand, several lenders are proud of themselves for having a very short loan application, which hardly takes 5 minutes to fill in. This is the case with payday loans with no credit check.

Such applications can make it harder for you to provide accurate details about your expenses. You may not think of things like clothes, food, servicing costs, and the like. There are some lenders that use the application form to get just contact details and then send a separate form to get information about their income and expenses. Sometimes this is done on the phone.

Both lenders and borrowers are not accurate about other debts

While perusing your income statement and credit report is vital, they cannot provide accurate information about your financial commitment. Therefore, lenders are supposed to put up some questions separately to know about other debts and credit commitments.

Some people clearly know what they owe but assume that they will not get the nod, so they hide some credit commitments, but sometimes you do it because you know you will not pay off the debt as you would not be able to afford them, so why lowering down the chance of approval?

This scenario is applicable for small loans to be paid off in one go. Overdraft charges also fit in this scenario because you do not pay. Money is automatically debited from your bank account. It is quite easy to have those expenses slipped through your mind.

Almost all lenders ask for details about other debts, but unfortunately, not all of them are clear about letting borrowers know what they want to know. For instance, when a lender asks a borrower to inform them about monthly credit payments, they fail to clearly specify that they also want to know their short-term loans in addition to long-term ones.

Borrowers generally ignore debts like payday loans and give only details of instalments that they have to make every month.

Missing or underestimating expenses is not always deliberate

If you are not smart enough to think clearly about your finances, you may forget to provide all information. Some lenders have a very short application form that you can fill in just five minutes, so you do not take your time to think about it.

Lenders never suggest that you take your time and carefully assess your bank statement. It is all right if you take a couple of days to fill up the form. However, on the other hand, it does not seem to be practical for you, especially when you have to apply for small loans for the unemployed.

You just quickly get a brief idea of your expenses and submit the form.

Another aspect is that when you give some details about your expenses, lenders try to take an overview of your spending. Chances are, when they stumble upon too high spending on a particular thing like food, they may think that it was an error instead of verifying it.

However, to some extent, it does not matter as it will not affect much of your repaying capacity, but sometimes this sort of approach takes a toll on the finances down the line.

For instance, you take out a short-term loan and fail to give an accurate account of your spending. The loan will be paid in three months and will terminate in April. Of course, your spending on next Christmas is not relevant. However, when the loan size is big, to be paid in 6 to 8 instalments, a lender should see a wide variety of expenses to check your affordability.

The final word

There could be a lot of other impacts you will likely experience because of too short an application form. Both you and your lenders commit mistakes on their part, and that results in affordability complaints.

Bad credit lenders know that many borrowers exaggerate their income and hide their real expenses, yet they give the nod; however, they should not if they suspect you have not been truthful, but if they go by the book, online lending will become a sibling of traditional lending. They know that things do not always go as planned. Sometimes borrowers need money desperately to keep the wolf from the door. It is advisable that you borrow money only when you are in dire need of it and can afford to pay it back. In the end, it will harm you only if you do not borrow sensibly.

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